Citigroup

Citigroup, based in New York City, is one of the largest financial services companies in the world. It has more than 5,000 bank branches and finance offices in the U.S., Canada, and 100 other countries. Citigroup was initially founded as the City Bank of New York June 16, 1812, later renamed CitiBank. Citigroup was formed on October 9, 1998, following the $140 billion merger of Citicorp and Travelers Group to create the world's largest financial services organization.[1] It is the first bank in the U.S. that had more than $1 trillion in assets. It has a large number of subsidiaries and offers services such as credit cards, investment banking, brokerage, and many other retail and corporate financial services. In 2006, it had sales of $146.5 billion and profits of $21.5 billion.[2] In 2011, Citigroup reported $78,353,000,000 in total revenue.[3]

Citi has some 200 million customer accounts. Besides the Citi brand, it also has Primerica Financial Services and Diners Club credit cards.[4]

During the financial crisis Citigroup received bailout funds and guarantees totaling $356 billion from the U.S. government.

Access Citigroup's corporate rap sheet compiled and written by Good Jobs Firsthere.

This article is part of the Center for Media and Democracy's investigation of Pete Peterson's Campaign to "Fix the Debt." Please visit our main SourceWatch page on Fix the Debt.

About Fix the Debt

The Campaign to Fix the Debt is the latest incarnation of a decades-long effort by former Nixon man turned Wall Street billionaire Pete Peterson to slash earned benefit programs such as Social Security and Medicare under the guise of fixing the nation's "debt problem." Through a special report and new interactive wiki resource, the Center for Media and Democracy -- in partnership with the Nation magazine -- exposes the funding, the leaders, the partner groups, and the phony state "chapters" of this astroturf supergroup. Learn more at PetersonPyramid.org and in the Nation magazine.

Five major banks, including Citicorp, "agreed to plead guilty to U.S. felony charges for rigging foreign currency exchange rates and pay a total of nearly $5.7 billion in fines" in May 2015, according to the L.A. Times. The banks agreed to the fines and three years of "corporate probation" with federal supervision and regular reporting requirements as part of a settlement agreement with U.S. and European officials.[5] Somewhat unusually, it was the banks' parent companies that entered guilty pleas, not subsidiaries.[6]

Traders at Citicorp, JP Morgan Chase, Barclays, the Royal Bank of Scotland, who reportedly referred to themselves as "The Cartel," were accused of manipulating currency prices between December 2007 and January 2013. The banks "each agreed to plead guilty to one felony count of conspiring to fix prices and rig bids for foreign currency exchange," the L.A. Times reported.[5]

The fifth bank, UBS, was found to have violated an earlier agreement made in 2012 after a Justice Department investigation into manipulation of Libor, a key global interest rate.[5]

Prosecutors said that traders "colluded to pad their returns from at least 2007 and 2013. To carry out the scheme, one trader would typically build a huge position in a currency, then unload it at a crucial moment, hoping to move prices. Traders at the other banks would play along, coordinating their actions in online chat rooms."[6]

The New York Times described the case as

"paint[ing] the portrait of something more systemic: a Wall Street culture that enabled many big banks to break the law even after years of regulatory black marks after the crisis.

“If you aint cheating, you aint trying,” one trader at Barclays wrote in an online chat room where prosecutors say the price-fixing scheme was hatched."[6]

Barclays: $550 million, plus a $60 million criminal penalty for violating an earlier agreement related to a Libor manipulation investigation in 2012, and $1.3 billion in settlements to the Commodity Futures Trading Commission, the New York State Department of Financial Services and the United Kingdom’s Financial Conduct Authority

JP Morgan Chase: $550 million

Royal Bank of Scotland: $395 million

UBS $203 million, for violating a 2012 Libor investigation agreement. UBS also pled guilty to one count of wire fraud.

In addition, the Federal Reserve announced that it would impose $1.6 billion in fines on the banks.[5]

Plutonomy memos

The word "plutonomy" was coined by Ajay Kapur, a global strategist at Citigroup, in 2005. The memos discussed a new era of economic growth that is powered and consumed by the very wealthy.[7][8]

The memos were highlighted in Michael Moore's documentary movie, "Capitalism: A Love Story."

Quotes from the Memos: “The world is dividing into two blocs -- the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spain, in seventeenth century Holland, the Gilded Age and the Roaring Twenties in the U.S.”

"Disruptive technology-driven productivity gains, creative financial innovation, capitalist- friendly cooperative governments, an international dimension of immigrants and overseas conquests invigorating wealth creation, the rule of law, and patenting inventions. Often these wealth waves involve great complexity, exploited best by the rich and educated of the time."

“We project that the plutonomies (the U.S., UK, and Canada) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization.”

“Since we think the plutonomy is here, is going to get stronger…” “It is a good time to switch out of stocks that sell to the masses and back to the plutonomy basket.”

Sourcewatch resources on plutonomy

Financial crisis and the bailout

On October 13, 2008, Citigroup was one of a group of nine banks that were told by the government they had to accept "bailout" funds. Citigroup received an initial $25 billion from this meeting, with the government receiving preferred shares on which Citigroup must pay 5% interest for five years and then 9%.[9]

Role in the crisis

Travelers merger

In 1998 Citibank merged with Travelers Group. The merger violated the Bank Holding Company Act (BHCA), but Citibank was given a two-year forbearance that was based on an assumption that they would be able to force a change in the law. The Gramm-Leach-Bliley Act passed in November 1999, repealing the BHCA and portions of the Glass-Steagall Act, allowing banks, brokerages, and insurance companies to merge, thus making the Citigroup/Traveler Group merger legal.

Top Citigroup officials were allowed to review and approve drafts of the legislation before it was formally introduced.[10]

After resigning as Treasury Secretary and while secretly in negotiations to head Citigroup, Robert Rubin helped broker the final deal to pass the bill.[10]

On November 6, 2009, John S. Reed, the former head of Citigroup who helped engineer the company's merger with Travelers Group, apologized and said banks that big should be divided into separate parts. “I’m sorry,” Reed, 70, said in an interview yesterday. “These are people I love and care about. You could imagine emotionally it’s not easy to see what’s happened.”[11]

Bailouts

In addition to an initial October, 2008 bailout of $25 billion[12], another $25 billion was given to the company along with guarantees to cover $306 billion of their assets on November 23, 2008 [13].

Use of bailout funds

Though the bailout funds were supposed to assist the recovery of the American economy, Citibank loaned $8 billion to Dubai six weeks after receiving the funds.[14]

Coal issues

Coal investments

In May 2007, Citi announced a $50 billion initiative over the next 10 years to address global climate change, consisting of "investment and financing of alternative energy, clean technology, and other carbon-emission reduction activities." [15] In reality, this amount represents less than one percent of Citi's $2.2 trillion assets, and the bank continues to be the largest financier of the coal industry, one of the leading causes of climate change.[16]

In November 2011, Citi was listed as the number 2 top global financier of coal-fired power plants in a report complied by various environmental groups entitled, Bankrolling Climate Change: A Look into the Portfolios of the World's Largest Banks. The report noted that Citi spent $9,587 million euros on coal plants around the world since 2005.[17]

In 2007, Citi worked with Dow Chemical Co., The AES Corp., and Suncor Energy, Inc. to put together a $100 million investment for GreatPoint Energy, a coal gasification company based in Cambridge, MA. [19] The investment was used to create a pilot gasification plant called the Mayflower Clean Energy Center, located at Dominion's Brayton Point station in Somerset, Massachusetts. This was the largest "green tech" investment of 2007, and "one of the industry's biggest venture capital rounds ever."[20][21]

Mountaintop removal

Citi has also financed billions of dollars to companies that practice mountaintop removal coal mining, a technique that blasts off the tops of mountains to reach the underlying coal deposits. The bank's clients include Alpha Natural Resources, which operates 27 surface mines in Kentucky, Pennsylvania, Virginia, and West Virginia; Arch Coal, which is the 2nd largest mining company in the nation and operates mines in Colorado, Kentucky, Virginia, West Virginia, and Wyoming; Massey Energy, which is being sued by the EPA for violating the Clean Water Act over 4500 times and faces up to $2.4 billion in fines; and Foundation Coal, the 4th largest coal mining company in the U.S.[18]

A 2011 report by Rainforest Action Network and the Sierra Club, "Policy and Practice: 2011 Report Card on Banks and Mountaintop Removal" listed PNC, Citi, and UBS as the top three financiers of mountaintop removal coal mining. The report card reviewed the financing practices of ten banks that had have provided more than $2.5 billion (in 16 loans and bond underwriting deals) to mountaintop removal companies since January 2010, according to the report.

Of the worst-performing banks, the report wrote of Citibank that, despite announcing a public policy to limit the financing of MTR extraction in 2009, the bank had since doubled its exposure to the sector.

Protests against Citibank coal financing

On November 5, 2007, activists from Rainforest Action Network, Coal River Mountain Watch, and the Student Environmental Action Coalition joined hundreds of student activists in blockading Citibank branch in Washington, D.C., in protest of Citibank's ongoing funding of new coal power plant development. RAN activists performed a "die-in" and delivered a wheelbarrow full of coal to the bank's managers. Police shut the branch down for the day, and no arrests were made.[22]

On April 1, 2008, as part of the Fossil Fools International Day of Action, 25 "billionaires for coal" blockaded Citibank's Upper West Side headquarters in New York City. Two people chained themselves to the door, while others - dressed in tuxedos and top hats - drew attention to Citi's funding of new coal power plant development and mountaintop removal mining. Police cut through the chains locking the two billionaires to Citibank's door, and arrested them.[24]

November 14, 2008: Rising Tide Boston helps banks market “Green Coal”

Rising Tide Boston set up “Green Coal” marketing tables outside branches of Bank of America and Citibank to highlight these banks high-risk investments in coal power and mining. Emulating the coal industry’s marketing pitch of “clean coal”, activists handed out samples of “green coal” while informing fellow citizens not to expect “green coal” to be clean, safe, or affordable. Rising Tide Boston held this event as part of the Day of Action Against Coal Finance, joining over 50 cities across the country to protest Citi and Bank of America’s investments in the coal industry.[25]

Lobbying

Citigroup has more lobbyists than any other financial company. The company was listed as a client by 46 of the 1,537 lobbyists filing to lobby on Financial Reform efforts. [29] The totals for the financial industry outnumber by a ratio of 25 to 1 number who registered to represent consumer groups, unions and other proponents of tougher regulations.

Earnings and bonuses

According to a report by the Attorney General of New York State Citigroup paid $5.33 billion in bonuses to executives and employees[36] while losing $27.7 billion after being a recipient of TARP bailout funds of $45 billion.

Breakdown of Citigroup 2008 bonuses from the Attorney General's report[37];

Top four recipients received a combined $43.66 million.

The next four received: $37.47 million.

The next six received: $49.81 million.

Number of individuals that received more than $10 million: 3

Number that received more than $8 million: 13

Number that received more than $5 million: 44

Number that received more than $4 million: 69

Number that received more than $3 million: 124

Number that received more than $2 million: 176

Number that received at least $1 million: 738

Former CEO Charles Prince wins worst "Scrooge" of 2008 award

In December 2008, Co-Op America announced its list of the worst corporate "Scrooges" of 2008, awarded to "the CEOs who exhibited the worst kinds of unbridled greed and a lack of compassion or concern for others over the last year." Charles Prince, former CEO of Citigroup, was on the list because of his role in the U.S.'s recent financial crisis. Analysts have cited Prince's mistakes in pursuing risky business strategies and lobbying for looser regulations of the banking industry as contributing to the economic downturn. The Scrooge award also mentions that is one of the top financers of coal mining and coal-fired power plants.[38]